Rand Paul: 'There is No Trade Between Countries. It’s You Doing It.'
The senator explains to Rand Paul Review how tariffs are a tax - on YOU. #21
Mike Mozart Flickr/Creative Commons
Senator Rand Paul has quickly become one of the most vocal Republicans to oppose President Donald Trump’s recent tariffs on foreign goods and is taking his message on the road.
On Saturday, Paul spoke to the Charleston County Republican Party in South Carolina, and I had a chance to catch up with him afterward.
In our interview, Paul understood the tension for Republican voters who support Trump, yet are open to the idea that the recently enacted tariffs are going to have a negative affect overall.
Rand Paul: I ‘Still Support Trump. But On Tariffs, I’m Worried There’s Going to Be More Harm Than Good.”
Paul told me, “I think we wanted to bring the trade debate on the road. Bring it to South Carolina. See what people are saying. This is an opportunity for a large group of Republicans to hear that message, and it’s not an easy one.”
The senator was clear about his support for Donald Trump.
“Because the president is very popular,” Paul said. “I supported Trump, still support Trump, love a lot of the things he’s done with his cabinet so far.”
“But on the tariffs I’m worried there’s going to be more harm than good,” he said. “That we’re missing the boat, that people aren’t quite getting what international trade has done for us as a country.”
Paul then explained how international trade has been a major positive for the U.S.
“I think there’s an instinct or an urge for people to say ‘Well, we want to blame somebody, blame somebody for problems that people might be having or having difficulty,” the senator said.
International Trade Has Led to Prosperity Since WW2
He continued, “But if you look at trade since World War II, and you look at prosperity as measured by, like, GDP per person, or per capita GDP, they look to be proportional. Trade has escalated. Our interconnectedness through international trade has really gone up exponentially since World War II, but so has prosperity.”
But what does this mean in real terms, today?
Paul explained, “Now, the problem with that message sometimes is people are like, ‘Well, I don’t feel better off. The last four years were kind of miserable. Food went up 20 percent. We’re struggling.’
“I think in the short term, that’s right,” he said. “I think people did better during the first Trump term. They did worse during the Biden term because of inflation.”
Paul then made a point, “But the question is will adding a tax to all goods that are exchanged across international lines, will that make people richer or make them poorer? I think it might have the same affect that inflation has. Tariffs don’t cause inflation but they do cause prices to go up.”
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Citing legendary free market economists, Paul said, “Everyone from Milton Friedman to Henry Hazlitt has acknowledged that. Tariffs are a tax. They add a cost to goods and prices go up for goods.”
The senator addressed how tariffs are affecting the stock market.
“We know now that millions of people this last week and even today, who were investing in the market, or self interested, are quite concerned. This is millions of people interacting, who actually sold $6.4 trillion worth of stock last week because they are worried about the tariffs.”
Paul understands that many Americans, particularly Republicans, are having to think more about this issue.
On his speech to the Charleston GOP, Paul said, “But I felt the crowd, this is the first time they are sort of hearing this. I thought the crowd responded well to it. I think the crowd is open to hearing it. Although, I think it’s a message that it’s the first time they’re hearing it.”
“That trade is actually a good thing, not a bad thing,” he insisted.
‘The U.S. Government Doesn’t Really Trade with Foreign Countries. You Do.’
An important point Paul made was that for all the talk of trade deficits, international trade has more to do with American citizens than any governments, our own or abroad.
Paul explained, “One of the things that I think is really true is that the U.S. government doesn’t really trade with foreign countries. the U.S. government doesn’t trade with the Chinese government. The U.S. government doesn’t trade with the Japanese government or the French government.”
“You do,” he said.
The senator continued, “So what happens, when you go to Walmart, you buy something, you buy it from Walmart. You don’t think about where it came from. A lot of times it came from China. Walmart bought it from China.”
“But it really isn’t the U.S. buying anything, so to measure a deficit and say the U.S. is at a deficit with China mistakes the basic notion of trade because there is no trade deficit that happens in a voluntary or free society,” Paul observed.
Paul elaborated, “There is no trade that happens that isn’t mutually beneficial. I think people don’t think of it that way, they want to add it up and say ‘Well, how much did China buy from us? How much did we buy from them?”
The libertarian-leaning Republican explained this in concrete terms.
“When you go to Walmart and you buy a television, if you buy a $600 television or a $500 television that was made in China, you want that TV more than you want your $500, and they want your $500 more than they want the TV,” Paul said.
“Trade is always mutually beneficial,” he continued, “So, nobody got ripped off. In fact, if you were able to buy a TV from somewhere else and it was $300 less than a domestic TV, you not only made a transaction that was beneficial to you, you’re $300 richer.”
Paul laid out how American consumers saving money through international trade can help the American economy.
Paul said, “So the average consumer who buys imported goods is probably to the tune of $5000 to $10,000 richer each year because they were able to get goods at a lower cost. And then the extra money they have, it will be spent on an American who mows your yard, or will be spent on an American sporting event.”
“There’s a lot of ways you can spend your money, the extra money gained from buying something from a foreign country,” he added.
(Trade) Deficits Don’t Matter
Paul said that people obsessed with trade deficits between countries are looking at it wrong.
Paul told me, “But there is no trade between countries. I think that’s what we get hyped up on, is that there’s a trade deficit with China.”
“There is no trade with China,” he said. “There’s only you going to Walmart, or you going to Toyota, or you buying a Honda.”
“It’s you doing it. You’re making the trade,” the senator explained. “And it wasn’t an unequal trade. You aren’t taken advantage of or you would have never made the trade.”
Rand Paul intends to keep talking to Republicans directly about this important issue.
One that many Americans are now being forced to confront, for good or ill.
I think President Trump knows what he's doing. He already has countries wanting zero tariffs between our countries and that's what it's all about in my opinion.
I disagree with Rand Paul on tariffs. What Trump is doing now is what no politician for the past 20 years has had the cajones to do. When our own military and security systems are at elevated risk of being compromised because they're wholly reliant on foreign manufacturing it's a big problem. Entire American towns are decimated because they never recovered from the loss of manufacturing jobs. There's two to three generations of American men who are shut out of healthy employment opportunities because they don't have the means for college or access to decent employment to support themselves. The most lucrative work for young women is porn.
Globalism is great for Wall Street but it's success was on based on sacrificing Main Street. Now here we are. Global trade war? Bring it. If Walmart loses market share I won't cry.